XML 39 R21.htm IDEA: XBRL DOCUMENT v3.23.3
Income Taxes
 12 Months Ended
Sep. 30, 2023
Income Taxes  
Income Taxes

14.         Income Taxes

Income (loss) before income taxes included loss from domestic operations of $129.2 million, income of $235.2 million, and income of $98.6 million for fiscal years ended September 30, 2023, 2022 and 2021 and income from foreign operations of $342.6 million, $315.4 million, and $310.2 million for fiscal years ended September 30, 2023, 2022 and 2021.

Income tax expense was comprised of:

​

​

​

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

    

September 30, 

    

September 30, 

    

September 30, 

​

​

2023

​

2022

​

2021

​

​

(in millions)

Current:

​

​

​

​

​

​

​

​

​

Federal

​

$

67.7

​

$

22.8

​

$

32.2

State

​

 

71.9

​

​

16.0

​

​

6.8

Foreign

​

 

52.8

​

​

75.8

​

​

53.2

Total current income tax expense

​

 

192.4

​

​

114.6

​

​

92.2

Deferred:

​

​

​

​

​

​

​

​

​

Federal

​

 

(71.8)

​

​

22.1

​

​

(28.8)

State

​

 

(84.3)

​

​

11.8

​

​

18.8

Foreign

​

 

19.8

​

​

(12.4)

​

​

6.8

Total deferred income tax benefit

​

 

(136.3)

​

​

21.5

​

​

(3.2)

Total income tax expense

​

$

56.1

​

$

136.1

​

$

89.0

​

The major elements contributing to the difference between the U.S. federal statutory rate of 21% for fiscal years ended September 30, 2023, 2022 and 2021 and the effective tax rate are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

 

​

​

September 30, 

​

September 30, 

​

September 30, 

 

​

​

2023

​

2022

​

2021

 

​

    

Amount

    

%

    

Amount

    

%

    

Amount

    

%

 

​

​

(in millions)

 

Tax at federal statutory rate

​

$

44.8

 

21.0

%  

$

115.6

 

21.0

%  

$

85.8

 

21.0

%

State income tax, net of federal benefit

​

 

(7.1)

 

(3.3)

​

 

20.2

 

3.7

​

 

8.0

 

2.0

​

Foreign residual income

​

​

59.4

​

27.8

​

​

46.4

​

8.4

​

​

45.6

​

11.1

​

Valuation allowance

​

​

16.6

​

7.8

​

​

(18.0)

​

(3.3)

​

​

12.4

​

3.0

​

Nondeductible costs

​

​

10.7

​

5.0

​

​

19.7

​

3.6

​

​

6.0

​

1.5

​

Change in uncertain tax positions

​

​

9.4

​

4.4

​

​

15.4

​

2.8

​

​

8.5

​

2.1

​

Audit settlement

​

​

1.9

​

0.9

​

​

(1.5)

​

(0.3)

​

​

10.4

​

2.5

​

Foreign tax rate differential

​

​

0.2

​

0.1

​

​

1.1

​

0.2

​

​

8.8

​

2.1

​

Income tax credits and incentives

​

​

(68.2)

​

(31.9)

​

​

(51.0)

​

(9.3)

​

​

(51.3)

​

(12.5)

​

Exclusion of tax on non-controlling interests

​

​

(9.4)

​

(4.4)

​

​

(5.1)

​

(0.9)

​

​

(6.1)

​

(1.5)

​

Tax exempt income

​

​

(3.3)

​

(1.5)

​

​

(5.9)

​

(1.1)

​

​

(5.4)

​

(1.3)

​

Tax rate changes

​

​

(3.2)

​

(1.5)

​

​

(4.1)

​

(0.7)

​

​

(26.8)

​

(6.5)

​

Return to provision

​

​

(0.5)

​

(0.2)

​

​

(1.5)

​

(0.3)

​

​

(9.5)

​

(2.3)

​

Other items, net

​

​

4.8

​

2.1

​

​

4.8

​

0.9

​

​

2.6

​

0.6

​

Total income tax expense

​

$

56.1

 

26.3

%  

$

136.1

 

24.7

%  

$

89.0

 

21.8

%

​

During fiscal 2023, valuation allowances in the amount of $21.0 million related to the AECOM Capital impairment charge were established for the portion of the charge that is not expected to be realized.

During fiscal 2022, valuation allowances in the amount of $21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence. The positive evidence included a realignment of the Company’s global transfer pricing methodology which resulted in forecasting the utilization of the net operating losses within the foreseeable future.

During fiscal 2021, the United Kingdom enacted a corporate tax rate increase from 19% to 25% beginning April 2023 requiring deferred tax assets and liabilities to be remeasured. The remeasurement resulted in a $25.9 million tax benefit, which is included in tax rate changes above.

During fiscal 2021, the Company partially settled its U.S. federal audit for fiscal 2015 and 2016 and recorded tax expense of $13.2 million due primarily to changes in tax attributes.

The Company is currently under tax audit in several jurisdictions including the U.S. and believe the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in adjustments, but will not result in a material change in the liability for uncertain tax positions.

Generally, the Company would reverse its valuation allowance in a particular tax jurisdiction if the positive evidence examined, such as projected and sustainable earnings or a tax-planning strategy that allows for the usage of the deferred tax asset, is sufficient to overcome significant negative evidence, such as large net operating loss carryforwards or a cumulative history of losses in recent years. In the United States, the valued deferred tax assets have a restricted life or use under relevant tax law and, therefore, it is unlikely that the valuation allowance related to these assets will reverse. In addition, the Company is continually investigating tax planning strategies that, if prudent and feasible, may be implemented to realize a deferred tax asset that would otherwise expire unutilized. The identification and internal/external approval (as relevant) of such a prudent and feasible tax planning strategy could cause a reduction in the valuation allowance.

The deferred tax assets (liabilities) are as follows:

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

    

September 30, 

    

September 30, 

​

​

2023

​

2022

​

​

(in millions)

Deferred tax assets:

​

​

​

​

​

​

Compensation and benefit accruals not currently deductible

​

$

92.2

​

$

91.6

Net operating loss carryforwards

​

 

102.3

​

 

113.7

Self-insurance reserves

​

 

23.2

​

 

4.5

Research and experimentation and other tax credits

​

 

43.1

​

 

111.4

Pension liability

​

 

44.7

​

 

52.1

Accrued liabilities

​

 

295.1

​

 

280.4

Capital loss carryforward

​

​

64.0

​

​

64.4

Partnership investment

​

 

102.0

​

 

—

Other

​

 

7.1

​

 

5.3

Total deferred tax assets

​

​

773.7

​

​

723.4

Deferred tax liabilities:

​

 

​

​

 

​

Unearned revenue

​

 

(7.0)

​

 

(1.5)

Depreciation and amortization

​

 

(13.1)

​

 

(111.4)

Acquired intangible assets

​

 

(5.4)

​

 

(11.2)

Investment in subsidiaries

​

​

(10.7)

​

​

(10.8)

Right of use assets

​

​

(94.0)

​

​

(125.6)

Contingent consideration

​

 

(34.2)

​

 

(33.6)

Other

​

 

(15.5)

​

 

—

Total deferred tax liabilities

​

​

(179.9)

​

​

(294.1)

Valuation allowance

​

​

(171.2)

​

​

(154.4)

Net deferred tax assets

​

$

422.6

​

$

274.9

​

As of September 30, 2023, and 2022, the Company has available unused federal, foreign and state net operating loss (NOL) carryforwards of $757.5 million and $848.0 million, respectively, which expire at various dates over the next several years and capital loss carryforwards of $199.4 million and $205.2 million, respectively, which mostly expire in 2025; some foreign NOL carryforwards never expire. In addition, as of September 30, 2023, the Company has unused state and foreign research and development credits of $27.2 million and $9.6 million, respectively, and other credits of $10.4 million which expire at various dates over the next several years.

As of September 30, 2023 and 2022, gross deferred tax assets were $773.7 million and $723.4 million, respectively. The Company has recorded a valuation allowance of $171.2 million and $154.4 million as of September 30, 2023 and 2022, respectively,

primarily related to foreign and state net operating loss carryforwards, capital loss carryforwards, tax credits and other deferred tax assets. The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carryforward periods, taxable income in carry-back years if carry-back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. Although realization is not assured, based on the Company’s assessment, the Company has concluded that it is more likely than not that the remaining gross deferred tax asset (exclusive of deferred tax liabilities) of $602.5 million will be realized and, as such, no additional valuation allowance has been provided. The net increase in the valuation allowance of $16.8 million is primarily attributable to an increase in valuation allowances of $21.0 million related to the AECOM Capital impairment charge in the US, a decrease in valuation allowances on foreign net operating losses and currency translation adjustments of $3.3 million, and decreases in valuation allowances of $0.9 million related to state net operating losses and credits.

Generally, the Company does not provide for U.S. taxes or foreign withholding taxes on gross book-tax differences in its non-U.S. subsidiaries because such basis differences of approximately $1.3 billion are able to and intended to be reinvested indefinitely. If these basis differences were distributed, foreign tax credits could become available under current law to partially or fully reduce the resulting U.S. income tax liability. There may also be additional U.S. or foreign income tax liability upon repatriation, although the calculation of such additional taxes is not practicable.

As of September 30, 2023, and 2022, the Company had a liability for unrecognized tax benefits, including potential interest and penalties, net of related tax benefit, totaling $79.5 million and $70.5 million, respectively. The gross unrecognized tax benefits as of September 30, 2023 and 2022 were $62.1 million and $55.2 million, respectively, excluding interest, penalties, and related tax benefit. Of the $62.1 million, approximately $60.7 million would be included in the effective tax rate if recognized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

​

​

​

​

​

​

​

​

​

​

Fiscal Year Ended

​

    

September 30, 

    

September 30, 

​

​

2023

​

2022

​

​

(in millions)

Balance at the beginning of the year

​

$

55.2

​

$

46.4

Gross increase in current period’s tax positions

​

 

3.5

​

 

17.4

Gross increase in prior years’ tax positions

​

 

17.9

​

 

2.4

Gross decrease in prior years’ tax positions

​

 

(13.3)

​

 

(8.0)

Decrease due to settlement with tax authorities

​

 

(1.0)

​

 

(1.4)

Decrease due to lapse of statute of limitations

​

 

—

​

 

(0.5)

Gross change due to foreign exchange fluctuations

​

​

(0.2)

​

​

(1.1)

Balance at the end of the year

​

$

62.1

​

$

55.2

​

The Company classifies interest and penalties related to uncertain tax positions within the income tax expense line in the accompanying consolidated statements of operations. As of September 30, 2023, the accrued interest and penalties were $24.4 million and $1.5 million, respectively, excluding any related income tax benefits. As of September 30, 2022, the accrued interest and penalties were $20.5 million and $1.7 million, respectively, excluding any related income tax benefits.

The Company files income tax returns in numerous tax jurisdictions, including the U.S., and numerous U.S. states and non-U.S. jurisdictions around the world. The statute of limitations varies by jurisdiction in which the Company operates. Because of the number of jurisdictions in which the Company files tax returns, in any given year the statute of limitations in certain jurisdictions may expire without examination within the 12-month period from the balance sheet date.

While it is reasonably possible that the total amounts of unrecognized tax benefits could significantly increase or decrease within the next twelve months, an estimate of the range of possible change cannot be made.